California metering


There are a number of key drivers that have forced most utilities in the United States to at least initiate investigation into advanced metering infrastructure (AMI). For electric utilities across the US, the most far-reaching change established by the Energy Policy Act of 2005 (EPAct 2005) is the aggressive action required in the areas of advanced metering and demand response. But California has been subject to over 300 pieces of legislation that, if they haven’t already, will very quickly sway any remaining ambivalence.

As California’s utilities develop AMI designs to achieve their goals, it is critical to balance the desire to adopt AMI technologies to support the well defined needs and requirements of today while allowing for flexibility for tomorrow’s uses in a secure system. It is also necessary to count the other costs, from the impact on human capital, the real benefits to consumers and the actual hardware itself.

The business case for smart metering has been long in the building, and as Stephen Nees, of the City of Anaheim, Public Utilities Department notes: “In our case the drivers have included legislative and regulatory initiatives, demand response concerns, the ability to offer new services, improve forecasting, and operational efficiencies.” From a regulatory perspective, municipal utilities are not subject to the Public Utilities Commission (PUC), but typically endeavour to meet or exceed PUC requirements. Nees says that Anaheim Public Utilities embarked on its AMI journey about 5 years ago with the introduction of smart meters for its largest commercial and industrial customers.

Drivers included the ability to offer time-of-use rates for the largest customers, which required meters with additional capabilities. The technology deployed for this category uses satellite paging or a public network. But some utilities are taking things a little more slowly. South California Edison (SCE) initially estimated that installing smart meters would produce a net loss of about half a billion dollars but now predicts that full deployment could produce some savings, according to Paul De Martini, director of SCE’s advanced metering programme. SCE intends to monitor advanced metering developments over the next 18 months but has planned to start its spending from 2008. “We want to take advantage of the technology evolution,” De Martini says. The utility also is carefully considering the extent of the installations and the level of technologies to be specified.

San Diego Gas and Electric’s (SDG&E) application for rate recovery of its US$500 million proposed investment in advanced metering infrastructure is pending at the CPUC, with a decision expected in January 2007. The utility hopes to finish installing electric and gas interval meters by 2010, says Ed Fong, SDG&E’s director of customer operations. Its advanced metering pre-deployment costs of US$9.3 million were approved last year.

Beyond regulations

Pacific Gas and Electric (PG&E) is one of the utilities that has adopted smart metering very enthusiastically. While it agreed with the California Public Utilities Commission (CPUC) that a smart meter programme could prove to be both economical to customers while helping better manage the state’s energy grid, the utility also saw an opportunity to greatly improve customer service and operational efficiency with smart meter technology. PG&E conducted a deep and thorough business case, which explored this potential and has resulted in 90% of the project costs being covered by operational savings.

The company is further using the technology to rapidly detect and analyse power outages. The company lists other benefits of the smart meter project as less intrusion into customers’ private lives, near elimination of bill estimation, better information on peak energy usage, and more opportunities for customers to economise.

Pilot programmes

In the spring of 2006, PG&E conducted a test in Vacaville, California with 5,000 gas and electric meters equipped with smart meter devices installed at 2,500 customer homes and businesses. “We tested meter reads and the deployment process and after working out a few minor bugs, had a successful rollout that can be replicated throughout our service area,” says Corey. The time-differentiated pricing options were tested in a state-wide pilot conducted in 2003-04 to measure customer interest in participating, and demand response benefits, in these programmes.

The results showed that there was sufficient interest from customers in participating in such rate options. Anaheim also reported positive results from their pilot programmes. The utility ran a two-year pilot with four vendor’s products. All of the products used wireless network technology. Two of the products worked well, but the others didn’t. Using one of the successful technologies, a demand response pilot was initiated that would take advantage of the metering capabilities of the new system.

The Spare the Power Days pilot ran during the summer of 2005 and provided voluntary participants with a US$0.35 per kWh saved on 12 peak power days. The results were comparable to those achieved in a statewide critical peak power pilot. With the pilots completed, the next phase for Anaheim is the completion of a business case, taking into consideration a variety of factors including deployment alternatives, economic issues, operational issues (including impact on union staff), service impacts and most importantly, funding.

The architecture selected includes meter network(s), data collection, meter data management with integration with CIS, OMS, and EAM. Deployment alternatives (unless mandated otherwise) include continued testing, limited deployment, limited plus targeted deployment and full deployment. Each of the deployment alternatives has different costs and significantly different advantages. Preliminary evaluation indicates that moving forward with limited plus targeted deployment will be recommended. In another pilot, 350 smart meters were recently installed in low income housing units scattered across Los Angeles County as part of a pilot programme sponsored by Los Angeles County and Southern California Edison.

The impact on human capital

Another critical issue is the impact on human capital, especially meter readers and installation technicians. Corey notes that the union played a critical role in developing the plan: “We worked closely with the union in developing measures to mitigate the impacts of the transition to the smart meter programme on the labour force. As a result the union supported the project. PG&E contracted with an installation firm to do the bulk of the network and meter installation work. Our existing resources are used for higher end meter exchanges. In addition, we gave impacted meter readers the opportunity to volunteer as installers.”

Customer-end technologies

Consumer education is obviously critical to a programme such as this and PG&E is in the process of developing a marketing campaign to help educate its customers about the meter change outs, rate options and customer service benefits. In addition, all customers will have access to their daily energy consumption – made possible by the technology specified, the utility’s web site along with tools to help the customers manage their energy bills. PG&E is offering tours and making presentations to key stakeholders such as major business customers, local and state government officials, and its own employees.

The consumer debate* Some of the criticisms of smart metering include its expense and a supposed lack of evidence proving that smart metering will benefit consumers. Jana Corey, speaking on behalf of PG&E, emphasises that all views have been considered in the process: “The CPUC conducted an exhaustive review and quantification of the expected customer benefits and all critics had ample opportunity to present their views. In the end, the CPUC approved our business case.

We deliberately chose proven technology for our smart meter devices and networks. We are always open to exploring new ideas and concepts which could arise from the use of the new technology.” But consumer groups still have their doubts. The Utility Reform Network (Turn), a consumer advocate organisation, is highly sceptical about the advantages of smart metering programmes: “The consumer is dependent on honest and accurate billing from the utility company. It is up to regulators to put protections in place and impose sanctions for utilities failing to accurately bill customers,” says Mindy Spatt, media director of Turn.

But surely smart metering would also go a long towards more accurate billing and demand response enhancements may even curtail the revenue collected by utilities? “The goal of demand response is not to curtail electricity use as much as to shift the time of use – maybe this is why the utilities prefer it to conservation programmes? The cost of the meters will go into the rate base, a benefit they have bragged about to investors.” Spatt concludes that there is no evidence the smart meters will be cost-effective:

“A statewide pilot project with large customers, paid for by taxpayers, has yielded very disappointing results.” But consumer watchdog groups on the other side of the Atlantic, where the industry is far more regulated than in California, express, quite literally, the opposite views. Energywatch, the United Kingdom gas and electricity consumer watchdog, recommends that smart meters be installed during all meter replacement activities and for all new connections:

“Smart meters can help in delivering carbon and fuel poverty targets through reducing energy usage. However, the current structure of the (UK) energy market means it is highly unlikely such meters will become widespread without further action,” says the organisation.

The hardware market

The market for smart metering units is heating up. According to Seattle consulting group Global Smart Energy, spending on smart meter hardware totaled US$800 million in 2005 and is expected to grow by 20% a year for the next decade as utilities change out an estimated 102 million old-fashioned meters. SCE alone plans to spend $1.3 billion to deploy more than 5 million smart meters between 2008 and 2012, says SCE’s De Martini.

And the California Energy Commission is considering a requirement that all new homes be equipped by 2008 with smart meter wiring that lets utilities control a home’s thermostat during an energy crunch. This is a highly lucrative market and the competitors include General Electric, Westinghouse and Switzerland-based Landis+Gyr.

Planning for the future

Smart metering technology is in what is called the “tornado” phase. This is a phase that has been witnessed with the rollout of cellular phones. The technologies are available, but the functionalities and protocols develop in response to both market and technology growth. Most California utilities have made decisions about the functionalities for this phase. That includes deciding on the number of functions the meter should support and load control technology, which allow utilities to remotely adjust thermostats, as well as automating shutoff and restoration of meters.

But the future also needs to be considered. PG&E is currently in the process of analysing opportunities to leverage the smart meter infrastructure for other customer services and operating efficiency improvements as well as the potential to offer services to third party utilities. This analysis is still in the preliminary stages, but initial discussions seem to indicate that this could be feasible under certain scenarios.

For and against: consumer advocates fight it out

Energywatch (UK )

“Evidence shows that smart meters have the potential to deliver significant benefits to priority consumer groups, improve energy efficiency and promote the effectiveness of the energy market, including:

  • Reducing fuel bills by providing better information on consumption patterns. Research suggests savings from change of behaviour associated with smarter metering can reduce consumption by between 3% and 15%. A reduction of 5% can result in a £35 per annum saving for an average consumer
  • Eliminating problems associated with estimated, inaccurate and late bills, and the knock-on effect, where consumers find themselves in debt, often put onto more expensive payment methods and unable to switch to a cheaper provider
  • Reducing annual carbon emissions equivalent to approximately 6% of savings to be produced from EEC2
  • Helping deliver security of supply by reducing demand for energy. A smart meter replacement programme could result in savings of around 1,250 GWh this year. This is similar to the amount of electricity a 300 MW combined cycle gas turbine station would produce in a year if it ran at full power all the time. Clearly the potential to save energy increases annually with ongoing replacement programmes
  • Facilitating the selling back of surplus energy by microgeneration technologies to the grid
  • Saving by suppliers on costs through reduced contact and complaints surrounding billing and data issues, and easier complaint resolution associated with poor billing
  • Better understanding of consumption patterns, offering the opportunity to introduce innovative demand management tariffs.”

The Utility Reform Network (USA) “Turn supports programs that both conserve energy and save consumers money and smart meters do neither.

  • There is no evidence the smart meters will be cost-effective. A statewide pilot project with large customers, paid for by taxpayers, has yielded very disappointing results. Some consumers could pay as much as US$500 more just for the meters, then face the risk of paying as much as US$10 more per day during hot summer afternoons.
  • More than half of the alleged benefits of smart meters come from eliminating thousands of meter reader jobs. Such ‘benefits’ could be achieved by replacing employees with cheaper oneway communications technologies that allow automated meter reading.
  •  Reducing residential and commercial air conditioning use with air conditioning cycling programmes, energy efficiency programmes and smart thermostats is the most direct way to target peak load reduction and is a cheaper and more viable alternative for demand side management
  • In 2001 taxpayers paid US$35 million so that corporations whose electric use dwarfs that of individual households and who have employees dedicated to managing their electric use could get free advanced meters. The ostensible goal of this gift to some of California’s largest companies was to enable them to reduce peak use during hot summer days. The amount of peak load reduction this investment has netted thus far is almost zero.
  • No electricity will be saved due to use of the meters. At best, the meters will result in load being shifted from peak time in the afternoon to mornings or evenings.”